Colorado's solar industry continues to gather steam

The solar industry continues to gather steam in Colorado, even as many subsidies have been changed or reduced.

Colorado was one of only five states to increase its third quarter photovoltaic (PV) solar portfolio more than 5 megawatts in the third quarter of this year, compared to last year’s third quarter, according to a report from the Solar Energy Industries Association (SEIA) and GTM Research released on Dec. 11. Overall, the U.S. solar PV market grew by 684 megawatts in the third quarter of 2012, 44 percent more than in the third quarter of 2011.

Neal Lurie, the Executive Director of the Colorado chapter of SEIA, attributed much of that growth mostly to reduced installation costs. Most of the growth appears to be coming from larger or third-party installations, especially after the changes to the Xcel Solar*Rewards program last year eliminated up-front rebates for residential solar PV installation.

“Costs for solar modules have decreased up to 70 percent in the past three years,” said Lurie, noting that Colorado has been a top-10 state for solar PV & thermal for most of the past decade.

Jesse Morris, a solar consultant with the Rocky Mountain Institute in Snowmass, said the changes to the Xcel Solar*Rewards program mean there are a better incentives for larger commercial and third-party installations that can take advantage of the federal tax incentive and business equipment depreciation.

“In 2011, Colorado ranked 5th in the nation as far as solar installs go, although we’ve been leapfrogged by Arizona and Hawaii more recently thanks to a combination of large incentives and good sunlight,” Morris said.

While Xcel continues to rebate much of the PV installation that hooks into its grid – small residential systems are given larger rebates than larger commercial and utility-sized systems – it no longer offers an up front rebate for residential installations. For a 4-killowatt residential solar system, that rebate was about $8,000 in the first year, a rebate that Xcel now pays out over a 10- or 20-year term with monthly checks or reduction to utility bills.

“Essentially, that has stretched out the time it takes to get the return on that investment well beyond 10 years,” said John Shaw the sales manager for Solectria Renewables’ Mountain West office in Denver. “The average ROI time for a commercial installation that can take advantage on the federal incentives and depreciation is seven years.”

But while incentives may not be as large as other states, Colorado has moved to create other means of increasing solar power, Morris said. Some of the most significant moves were placing a $500 cap on residential permit fees and creating the Solar Communities program, he said, which enables utility customers to participate in a solar program even if they can not place solar panels on their roofs.

Through Xcel’s Solar*Rewards program, the Solar Communities program is designed to produce 4.5 megawatts of new solar electricity, by allowing project developers to build “solar gardens.” Developers could then sell shares in these systems, which are limited to a 500-kilowatt maximum, to utility customers.

When the program opened its doors in August it had received applications for three times the power it was trying to generate within 30 minutes and applications were closed one hour after the program was opened. Many of these solar gardens will be built in the Denver-Boulder area.

Denver has also been named the country’s first “Solar Friendly Community” in a program begun by COSEI and RMI. In fact, the program was essentially created by looking at the best practices initiated by Denver over the last four years, which includes a $50 over-the-counter permit fee for standard residential rooftop installation, said Jessica Scott, the city’s sustainability strategist.

Homeowners who want to enjoy the benefit of solar power without the up-front costs also have options in third-party installers – companies that install, maintain and own a home’s solar panels and charge a fixed rate for the electricity they generate. That allows these companies to also take advantage over the tax incentives and depreciation.

Ronald M. Abramson, chief executive and chairman of NexGen Energy Partners LLC, said the ability to “monetize” those incentives are a very important part of his third-party installation business, but not the only way to create profits in the renewable energy field.

“If you look at incentives they really create some incredible cycles in business. You only have to look at what happened with all the layoffs in the wind energy field to see the negative consequences,” said Abramson, whose company also installs wind systems.

“I think we can be competitive now. I’d rather see an elimination of subsidies for the fossil fuel industry so we’d all be playing on an even field.”